Three essays on general equilibrium models with imperfect financial markets

Marcos de Barros Lisboa, University of Pennsylvania

Abstract

The dissertation analyses general equilibrium models with imperfect financial markets. The main objective is to investigate the optimality and determinacy of the set of equilibrium allocations when households face restrictions on financial markets. The class of restrictions considered includes, in particular, incomplete financial markets and borrowing constraints. Chapter 1 provides an introduction to the dissertation and a more detailed description of each chapter. Chapters 2 and 3 analyse the equilibrium consequences of assuming the existence of imperfect financial markets. We show that if assets pay in units of accounts then the set of equilibrium allocations is indeterminate. If assets pay in units of some commodity then the equilibrium set is determinate. However, we show that in this case the existing financial markets are not efficiently used in equilibrium. For a large set of economies there is always an allocation that Pareto dominates the competitive allocation and that is feasible given the existing restrictions on financial markets faced by the households. The last chapter analyses a general equilibrium model with moral hazard. Agents behave strategically in financial markets and contracts are determined endogenously. We provide sufficient conditions for the existence of equilibrium. We also show that in this case there is an allocation that Pareto dominates the equilibrium allocation and that satisfies the incentive compatibility constraints.

Subject Area

Economics|Finance|Economic theory

Recommended Citation

Lisboa, Marcos de Barros, "Three essays on general equilibrium models with imperfect financial markets" (1996). Dissertations available from ProQuest. AAI9627958.
https://repository.upenn.edu/dissertations/AAI9627958

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